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MARKET FOR SHIPS

3.1 AIMS OF THE LECTURE

a)

To introduce the popular types of ship

b) To explore the reciprocating relationship of demand and supply of ships

c)

To outline the roles of shipbuilding industry in respond to the demand for ships.

3.2 THE ROLES OF SHIP

The basic function of a ship is to transport goods or passengers from one point to another
with water as its medium of transport, but it can serve for many other purposes as well
dependent on its intended design.
Since a large part of the world is covered by water, and ship is the most efficient mode of
transporting cargoes in large quantity, it is reasonable to consider ship will continue its role
for centuries to come.
Most of the ships worldwide are built for merchant roles, and the rest are for work and special
missions.
In playing its role ship is determined by three main factors:

The type of cargo it carries

The type of construction and materials used
The area of its operation

a) Ship Types
The function appointed to a particular ship will give its type of identity such as cargo ship,
work ship, passenger ship, and leisure ship.

Ship types
CARGO
SHIP

PASSENGER
SHIP

WORK
SHIP

LEISURE
SHIP

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Each of these types can be defined as follows:

Cargo ship
Cargo ship is a ship designed to carry cargo from one point to another point as part of
a trading activity.

Passenger ship
Passenger ship is a ship designed to carry large number of passengers from one point
to another point, usually on a regular basis.

Work vessel
Work vessel is a ship or vessel designed to be used for carrying out or supporting
certain task.

Leisure ship
Leisure ship is a ship designed as means for supporting leisure activities.

Examples of each type of ship are as follows:

Cargo ships
Cargo ships
Dry cargo ships
Liquid cargo ships
Tramps
Oil tankers
Bulk carriers
Liquefied gas carriers
Cargo liners
Chemical carriers
Container vessels
Barge carriers
Ro ro ships
Refrigerated cargo ships
Timber carriers
Cars carriers
Livestock carriers

Figure 3.1 Container vessel

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Figure 3.2 Bulk carrier

Figure 3.3 Ro-ro vessel

Figure 3.4 Oil tanker

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Figure 3.5 LNG carrier

Figure 3.6 Barge carrier

Passenger ships

Passenger ships
Ships
Ferries
Liners
Cross channel ferries
Cruise ships
Coastal ferries
Emigrant and pilgrim ships
Harbour ferries

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Figure 3.7 Passenger ship

Figure 3.8 Ferry

Work vessels
Military ships
Aircraft carriers
Cruisers
Destroyers
Frigates

Work crafts
Cable layers
Tug boats
Dredgers
Tenders

Work vessels
Fishing vessels
Trawlers
Gillnets
Purse seiners
Long liners

Corvettes
Submarines

Pilot crafts
Floating docks

Pull-end liners
Factory ships

Amphibious
assault ships
Patrol boats

Salvage/buoy
vessels
Floating
cranes
Light ships

Offshore vessels
Supply vessels
Pipe layers
Crane barges
Drill ships
Semi sub rigs
Accommodation
barges
Anchor handling
tugs
Production
platforms
Floating storage
FPSO

Special purpose
Research vessels
Oceanography
Expedition
Wave and tidal
power turbines
SAR vessels
Observatory
vessels

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Figure 3.9 Aircraft carrier

Figure 3.10 Frigate

Figure 3.11 Submarine

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Figure 3.12 Cable layer

Figure 3.13 Tug boat

Figure 3.14 Dredger

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Figure 3.15 Fishing vessel

Figure 3.16 Factory ship

Figure 3.17 Supply vessel

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Figure 3.18 Anchor handling tug

Figure 3.19 FPSO

Figure 3.20 Research vessel

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Figure 3.21 Wave power turbine

Figure 3.22 Tidal power turbine

Figure 3.23 Observatory ship

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 Leisure ships
Leisure ships
Cruise ships
Sport vessels
Yachts
Racing vessels
Floating Restaurants
Tourism vessels

Figure 3.24 Cruise ship

Figure 3.25 Sport vesel

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Figure 3.26 Yacht

Figure 3.27 Floating restaurant

Figure 3.28 Racing ship

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b) Construction and materials

Construction
The cargo to be carried and the operational function of the ship will determine its
construction, and hence gives its characteristics. Generally the types of construction will refer
to the followings:
-

Framing system
Hull construction
Number of hulls

Materials
The characteristics of the ship would also be determined by the materials being used for the
construction of the ship. Some of the commonly used materials for shipbuilding would
include the followings:
-

Steel
Aluminium
Wood
Composite

c) Area of its operation

The area of ships operation will determine the structural, operational, and safety and
environmental requirements of the ship to undertake its role. This area of operation would
include the followings:
-

Ocean
Inter islands
Coastal
Inland waters
Lake

3.3 DEMAND AND SUPPLY OF SHIPS

There are two categories of shipbuilding market: new building market, and second-hand
market. Various reasons for a firm or individual to purchase a ship whether it is new or used,
among other things would include:
To cater to the increasing demand for certain type of cargo or task
Renewing inefficient old ship
Adding new ships to the existing fleet due to increase of demand
Since majority of ships in operation are merchant ships i.e. for shipping cargoes from one
point to another or transporting passengers, therefore the discussion of demand and supply of
ships will be started from the shipping industry, and will be followed by the rest of the ship
types.

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a) Cargo shipping
Shipping is a service business; ship demand depends on several factors which include price,
speed, reliability, and security. The demand starts from the volume of trade, which can be
categorised into energy, agricultural products, metal industry products, forest products, and
industrial products. The volume of trade is mainly dictated by the economic growth in certain
region of the world which will increase the buying capacity and the need for the supply from
the other regions, and this will create shipping market. Therefore the volume of trade is
always fluctuating and demands for observance in order to determine the shipping trend.
The development of shipping trend can be categorised into short term and long term trend.
There are three categories of ships being used in shipping activities i.e. self owned ships,
chartered ships, and liner ships.

Self owned ships

Self owned ships are the ships that are owned and operated by the owner of the cargoes
they carry (the shipper). This is usually undertaken by producer of typical goods.

Chartered ships

Due to fluctuation in the quantity of the cargo to be shipped, and any other reasons the
cargo owner decide not to own the ship, but instead to charter it from other party for
shipping the cargo. There are four known common chartering schemes:

Bare boat charter

The ship is hired without crew or any operational responsibility from the owner

Time charter
An agreement between the owner and charterer to hire the ship, complete with crew,
for a fee per day, month, year, or multiple years

Contract of affreightment
The ship owner contracts to carry regular tonnage of cargo for an agreed price per ton.

Voyage charter
The ship owner contracts to carry a specific cargo in a specific ship for a negotiated
price per ton.

Liner ships

Liner is a ship that is operated on a regular dedicates trips, and at a scheduled time, so that
the shipper can hand over the cargo to be carried to the designated port with agreed
shipping fee.
Due to vary in the type of cargo, the type of ship to be used as liner is usually is a general
cargo or container ship.

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There are two factors that determine the demand and supply of ships driven by the cargo
shipping, which include:

The freight market

The shortage of fleet due to demolition

Freight
market
Newships

Scraped
ships

Figure 3.29 Demand and supply of cargo ships

b) Passenger ships
Beside of their type passenger ships can also be categorized based on their operational
schemes into liner and chartered.

Passenger liner
Similar with the cargo liner passenger liner is operated on certain routes, and follows
a set schedule. For cruise ship due to its typical characteristics and for leisure
purposes it is not categorised as passenger liner ship, even though it carries passenger
and serves certain routes, and follows a set schedule.
The market for long distance liner is decreasing particularly in the developed
countries, due two main reasons such as the time taken for the journey, and the severe
competition from the low cost flight. For ferry liners the market is considerably
constant especially in the developing countries for there is sometimes no other
transport alternative.
In general the demand and supply of passenger liner ships including ferries is driven
by the economy development in particular region that attracts people to commute to
and from that region which can be illustrated as follows:

Economic
growth

People
movement

Ships
demand

Figure 3.30 Demand and supply of passenger liner ships

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Chartered passenger ship

For special purposes occasionally there are passenger ships being chartered. But due
to limited market the ships are usually chartered from the less busy liners, or
temporally converted ships. Therefore the demand and supply of chartered passenger
ships is difficult to predict.

c) Work vessels
The work vessels are categorised based on their operational functions, and their demand and
supply are determined by the specific needs and development in their filed area of works.

Military operation

Beside warships included in the category of military vessels are coastguard and patrol
vessels. The demand and supply of military ships are very much determined by the
political situation, political policy, and economic condition of a particular country.

Work operation

There are a wide range of works that need special vessel to support their operation, and
therefore the demand and supply of work vessels are driven by specific variables related
to the work such as: economic growth and development of maritime infrastructure.

Fishing operation

There are wide variety of fishing operation, and so the vessels to be used. Due to
environmental consciousness and to prevent over fishing gradually the fishing activities
are being controlled by local as well as international authorities.
The demand and supply of fishing vessels are determined by the consuming market and
fishing ground condition.

Off-shore operation

Off-shore operation is mainly dominated by oil and gas drilling activities. Since the
shallow water oil resources are drying up, the off-shore activities are gradually moving to
the deeper and fiercer environment seas, and therefore the demand and supply of offshore operation and supporting facilities are also shifting to the more complex and
advanced technology vessels.

Special operation

Generally special operational vessel has very specific characteristic and built specially for
that particular operation, therefore the demand and supply of this type of vessel is
difficult to predict, and more depend on the development in specific field of activities.

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d) Leisure vessels
The characteristics of leisure vessels are vary from one type to another; they range from
dealing with large number of people to individual, from high speedd to stationed vessels. The
demand for leisure vessels is very much determined by the economic growth and security in
the region, and the availability of supporting infrastructure.

3.4 THE ROLES OF SHIPBUILDING INDUSTRY

a) Shipbuilding industry
Shipbuilding industry is the industry that dealing with building, maintenance and repair of
ships and other floating as well as under water vessels. Shipbuilding industry sometimes is
also called shipyard or ship builder.
b) The roles of shipbuilding industry
indus
The main role of the shipbuilding industry is to respond to the market demand for ships by
producing ships that satisfy the ship owners objectives,, which would include:

Deliver the ships on schedule

The ships are built in accordance with the estimated cost
The ships are built in accordance with the agreed specifications and met all the
requirements and standards.

And can be illustrated as follows:

On cost

on
schedule

on spec

Ship
Figure 3.31
3. Objectives of ship production

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c) Aspects in respond to the market

Market for ships is a reciprocating relationship between the demand for ships and the
response from the shipbuilding industry. Unlike car industry shipbuilding is a made to
order industry, which means that there must be a request before the ship is being built, but
on the other hand shipyards have to be competitive in order to attract the potential customer
to place the order.
In anticipating for the ship orders shipyards have to continuously watch the market trend and
updating themselves with new shipbuilding methods and technologies.
The role of shipbuilding industry in respond to the market demand is mainly determined by
the following aspects:
Capacity
Demand for the ships is not steady but fluctuating dependent on many aspects such as global
economy, political situation, and industrial developments, therefore shipbuilding industry
have to continuously monitor the trend, and anticipate for the future development in ship
types and size, so that there will not be over capacity or under capacity.
For individual shipyard in order to benefit from the market condition, beside studying the
market trend it is also important to determine the type and size of ships to be built far in
advance, so that its investment could be optimised.
Availability
In respond to the market availability of the shipbuilding industry play an important role to
ensure that the demand can be fulfilled. But due to fluctuation in ships demand it is
sometimes difficult to match between the demand and the availability.
To estimate its availability shipyard should implement good production planning, so that the
progress in each stage of ship production can be predicted, and its availability can be
identified.
Competitiveness
Shipyard should be competitive in order to obtain a contract. The competitiveness should be
achieved by continuously improving productivity and efficiency.

3.5 CONCLUDING REMARKS

a) The basic function of a ship is to transport goods or passengers from one point to another
with water as its medium of transport, but it can serve for many other purposes as well
dependent on its intended design.
b) The role of a ship is determined by three main factors: the type of cargo, the type of
construction and materials, and the area of operation.
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c) Type of ships can be categorised into: cargo ships, passenger ships, work ships, and
leisure ships.
d) There are two categories of shipbuilding market: new building and used ships.
e) Reasons for purchasing a ship would include:
To cater to the increasing demand for certain type of cargo or task
Renewing inefficient old ship
Adding new ships to the existing fleet due to increase of demand
f) The main role of the shipbuilding industry is to respond to the market demand for ships by
producing ships that satisfy the ship owners objectives, which would include:

Deliver the ships on schedule

The ships are built in accordance with the estimated cost
The ships are built in accordance with the agreed specifications and met all the
requirements and standards.

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